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Plight of The US Auto Industry: An Interpretation

Tuesday November 11, 2008

What happened to the American auto industry seems to be the convergence of many separate mini-disasters, almost none of which they had any control over. Personally, I think that said elements to the bigger problem are as follows and have linked together in the following ways.

First, there was the very first gas crisis, back in the day. This had forced them to abandon all that they knew and all their tried and true stuff in order to fully revamp their line-ups and meet the new market demands. Of course, success was limited, as it usually is at the start of any new design and they therefore experienced their share of problems. At the same time, there was an influx of cheap cars from overseas, which were typically a bit more reliable, seeing as these were their very own “tried and true” product they had been building back home for ages. This has, in turn, given birth to an entire generation who will not give the domestics a fair chance and who also seem to typically believe in a mythical infallibility of all things foreign. Of course, with Honda, Toyota et al abandoning their tried and true designs and going the modern/tech route these days, we see the appearance of poorer reliability, which is surely a direct result of no longer using their own tried and true designs and components.

The problems weren’t all quality thou, most of the “problems” were that the cars didn’t quite handle or ride as well as some of their competition, because these were among their (Big 3) first attempts to build cars a la Japanese, German, whatever. And even if they weren’t necessarily bad, the lovers of the foreign cars would not like them as they weren’t quite as good at being German, Japanese, whatever, as the real deal. On the flipside, the domestic diehards were also not fans, seeing as the home team had completely given up what they were and thus, the new products were “not real American cars.” People wanted power, large engines, RWD, etc. When they were shopping American, but a Charger was now a tarted-up Dodge Omni or, in other words, a subcompact, economy car.

Either side was evaluating them by their respective metric of what they should be and they weren’t measuring up: They started to gain the reputation of being terrible cars, because they did not meet the expectations of either party, as they were now attempting to make foreign cars, but not making copies that were exact enough. This, of course, kept pushing the idea that they were junk and not even worth considering, long after any big problems were solved. And while yes, there were problems here and there, the competition had theirs too, but this was compounded, in the Big 3’s case, by this phenomenon.

Also, given that everything needed to be redone, this caused the creation of the cost-cutting age: to replace a somewhat differentiated range of models that fit in the same class, they were left scrambling to fill their same, large line-up with new product. Therefore, we get multiple “clones” or one same product and the differentiation being done between each example is minimal. Enough was one to give each iteration a sense of styling that would fit well into its respective brand and this gave birth to the infamous multi-levelled structures of Dodge, Plymouth and Chrysler; Ford, Mercury and Lincoln; Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac. The brands were no longer compliments to each other, trying to offer “a car for every purse or purpose,” but a multi-tier system of essentially different trim levels of one car.

Of course, with an evolving market, a company typically needs to evolve as well. The problem is that throughout this whole ordeal, many other problems before, and many problems that have presented themselves since, the union is very much uncooperative. Excess capacity is needlessly maintained due to contracts, wages and benefits agreed to in better days are not sacrificed nor even openly renegotiated. Any attempt from the company to stray from the status quo is met with fierce opposition from the union. A culture of mistrust and animosity is bred over the years as well with all this infighting and it becomes more of a war between the company and the workers. This means that the financial side of the big three struggles as they cannot adapt to a changed market, an evolved industry and a totally different world. Due to this inability to adapt comes the ongoing cost-cutting and the resulting idea that “American cars are cheap.”

By the mid 90’s, Chrysler had exhausted the K-Car, and the modernised line-ups of GM and Ford are both getting a little old. Therefore, they all go on the offensive and begin to redo their line-ups once again! Of course, redoing practically all of your line of product comes at a hefty price, so the cost-cutting was still present, though finally to a lesser extent. Rather than build as cheaply as possible, they designed and built with the price in mind; new designs again also meant that they would experience some problems for a couple of years as well. With the bitter taste left from these other eras of less than triumphant glory still in the mouths of consumers, this was once again reinforcing the idea that they built junk. The foreign competition tended to have evolutionary designs, meaning that they’d keep a lot of their “tried and true” stuff and did not have as much of these launch hiccups. Of course, the promise that they were changing to something entirely new, followed by some issues on launch f this new product meant that a lot of people were now convinced that this confirmed that they only built crap. Problems would be fixed in the following model years, but most made up their minds right away.

Then came the era of the SUUV, which isn’t a disaster on its own, but sets up the perfect storm we see today. Actually… not so much the SUV era as an age of excess: Everyone wants big, and all the producers of all the goods are more than willing to give it to them. It starts with the big three, in the automotive world, but others soon develop these big trucks, SUVs and high-powered cars in no time as they’re eager to jump on the bandwagon. Nobody seems to remember that history repeats itself and, more notably, that the muscle car era (arguably the previous age of excess, automotively speaking) ended with the previous gas crunch. Rather than develop efficient cars, everyone focuses on their larger vehicles and on power output as the hp war goes on for cars. Automakers were also led to believe that alternative energy cars would never fly either, as the EVs made by many a company ended-up being failure from a business perspective and scrapped by the early 2000’s.

With recent failure in ventures seeking environmentally sound and energy efficient vehicles, the automakers happily give the people the excess that they seem to crave and milk the cash cow for all it’s worth. After all, the selling of these vehicles is very lucrative business for all automakers and there is no reason to believe that there is going to be any end to this anytime soon.

Fuelled by recent success, the Big 3 are seen revamping their line-ups again and doing everything they can to do launches without issues, mostly with success this time around. Unfortunately, a lot of people are just a little bit reluctant to give them a shot, right or wrong, and so sales aren’t as high as they would hope and certainly not enough to warrant all of the overcapacity that they are forced to keep via contracts. The idea is that they will ride this out with things as they are and the people will eventually come. Image campaigns are launched for practically every brand (at least at GM and Ford) and the emphasis is put onto really pushing the idea that not only have they changed, but are completely different. Actually, most of these campaigns make NO reference to the past, which is a first for the heritage rich Big 3. It’s finally not about what they were, but about what they are now.

Unfortunately, unforeseen consequences to that is the idea that they have “sold out” once again, as they are changing everything they are, therefore alienating some of the diehards and they also replaced household names like Grand Am to new, unknown names like G6. This means that the loyal customers are no longer familiar with the product and therefore somewhat uncomfortable, even if they were not among the alienated. For the potential conquests, the new names reinforce the fact that the models are new and, with the way history played-out, they want to see how these new models fair over time. Also, the Taurus, Grand Am, etc. Were still familiar to most of this crowd too, who are also left confused by the introduction of all those new model names.

Chrysler faces its own set of problems after a supposed merger during the mild resurgence seen in the late 90’s ends with Daimler-Benz sucking them dry of cash and kicking them to the curb. With limited resources and a Daimler self-protectionist attitude of control, Chrysler has to make the best with what they have and therefore launches one of their arguably worst line-ups in history. Despite the promising hit of the LX cars, everything that follows is a flop… Most importantly, the strong presence now seen by Ford and GM in the family car market is failed to be matched by Chrysler, whose entries are most likely universally considered as the bottom of the barrel in the whole class.

Then comes a gas crunch and a crumbling of the economy, resulting in a crash of the automotive sales market and slow sales industry-wide as the Big 3 were trying to whether their existing storm and slowly rebuild and adapt to the best of their abilities. This brings us to today…

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